Department of fertilisers (DoF) and the Planning Commission are at loggerheads over the proposed urea investment policy.
While DoF wants to benchmark the future price of urea from greenfield and brownfield projects at 95% of import parity price (IPP), the Planning Commssion says the future pricing policy should be based on global bidding. It is of the view that India should try and meet its future requirements on committed offtake at most competitive prices, received under open global tenders.
According to sources in the DoF, the differences surfaced at a recent meeting between officials from the fertiliser ministry and the Planning Commission to discuss the draft policy. Planning Commission member Kirit Parikh contested the DoF proposal saying the draft policy should be in step with ultra mega power projects and allow global bids.
The broad parameters of the draft urea policy outlines the confirmed offtake of urea from new and brownfield projects at 95% of the monthly IPP, fiscal incentives for these projects in the form of exemptions in customs duties on imported capital goods, exemption in excise duty and income tax holiday for first 10 years of commercial production.
The customs duty exemption will also imply for revamp of existing units for a limited period under New Pricing Policy-III till 2009, the sources added.
The proposed policy seeks to create a comfort zone for investors, as these projects are capital intensive. It advocates for a floor price of Rs 9,800 per tonne for offtake of stocks to protect investors against any sharp fall in the international market.
To eliminate the delay in provision of subsidy, the new policy proposed to ensure on account payment of subsidy on urea sale within two months unlike the current system wherein producers have to wait for months to get subsidy arrears. Any lapse in this regard will attract interest at bank rate.
The investments in the existing units will be encouraged by offtaking production beyond notionally rated capacity of the plants at a price equivalent 90% on the monthly IPP, provided such plants produced beyond 110% of the notionally rated capacity in a particular year, the new policy says.
To restart eight closed units of Hindustan Fertiliser Corporation, Fertiliser Corporation of Indian, RCF Trombay, FACT Udyogmandal, Duncans Kanpur will be taken up by providing them a retention price with a ceiling of 95% on monthly IPP.